L.A. suit alleges discriminatory lending by JPMorgan

Foreclosure data

• African Americans and Latinos were both more than 1.5 times as likely as white borrowers to receive a predatory loan.

• Loans in predominantly minority neighborhoods were 2.19 times likelier to result in foreclosures than in mostly white ones.

With thousands of homes still underwater from the foreclosure crisis of 2008, the city of Los Angeles on Friday filed a federal suit against JPMorgan Chase & Co. over what it says were discriminatory lending practices.

The bank has offered bogus deals to minority communities and denied credit to entire neighborhoods based on race, City Attorney Mike Feuer said. Practices alleged include flooding areas with subprime mortgages since 2004, even when minorities qualified for better terms, and declining to refinance or modify loans to minority customers on “fair terms” since 2009.

The city lost out on roughly $1.7 billion in property taxes and increased city services due to the foreclosure crisis, according to a report cited in the suit. Feuer said his office is still calculating the damages it believes JPMorgan caused.

“This is about bringing back the neighborhoods of Los Angeles,” which were affected “in ways that were utterly preventable,” Feuer said.

JPMorgan Chase’s $2.4 trillion in assets make it the biggest bank in the U.S., according to Forbes.

A JPMorgan spokeswoman said it was disappointing the city took an “adversarial approach to address city finances” and the bank will defend itself in court. “While the downturn was beyond our control, we will continue to partner with Los Angeles in the recovery,” Suzanne Alexander Ryan stated.

The suit claims JPMorgan Chase violated the federal Fair Housing Act. Most of the loans JPMorgan made were in white neighborhoods, but foreclosures were predominantly in minority neighborhoods, the suit says.

The foreclosure crisis caused by predatory lending cost the city $481 million in property taxes and $1.2 billion in increased services costs, according to a 2011 report by the Alliance of Californians for Community Empowerment and the California Reinvestment Coalition.

The claim against New York-based JPMorgan is the most recent in a series of lawsuits by municipalities across the U.S. to hold mortgage lenders responsible for fallout from the collapse of the housing market. Los Angeles sued the next three largest banks – Bank of America, Citigroup and Wells Fargo – for similar practices in December. On Wednesday, District Judge Otis D. Wright II denied a bid to dismiss the city’s complaint against Wells Fargo.

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